Paul Ryan calls for a full accounting of the Administration’s green energy slush fund

by Paul Ryan on Thursday, December 1, 2011 at 4:12pm

Earlier this week, I sent a letter to Herb Allison, whom the Obama administration has tasked with performing an independent review of the Department of Energy’s loan portfolio. This is the same portfolio that included the ill-advised $535 million loan guarantee to Solyndra, the solar company that declared bankruptcy in September. I asked for a “fair value” review of DOE’s loans. My concern is that taxpayers are not getting a full accounting of the true risks and costs of these loans and loan-guarantee programs. What is the true likelihood that taxpayers will end up on the hook for more Solyndras? This problem is not just limited to the DOE’s loan programs – it occurs throughout all government loan programs, because of the flawed way in which government accounts for the risks and costs of these programs. Senate Republicans on the Budget Committee have advanced reforms to fix this problem, and the House Budget Committee will soon be coming forward with similar reforms to increase transparency and protect taxpayers. Stay tuned.

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November 29, 2011

The Honorable Herbert Allison

1000 Independence Avenue, SW

Washington, DC 20585

Dear Mr. Allison:

As part of your independent review of the Department of Energy (DOE)’s loan portfolio, I request that you include in your public report a fair-value estimate of the cost to taxpayers of the DOE loan guarantee programs. Americans deserve the most honest, accurate assessment of how Washington spends their hard-earned tax dollars.

The costs of DOE’s loan guarantees are currently calculated using the inadequate methodology prescribed in the Federal Credit Reform Act (FCRA). Under FCRA rules, government-backed loans are discounted at risk-free interest rates – the interest rates on U.S. Treasury securities. As the Congressional Budget Office has stated, by incorporating market-based risk premiums, fair-value estimates recognize the financial risks that the government assumes when issuing credit guarantees. Put simply, the FCRA methodology understates the true cost to taxpayers of providing these credit programs. The Administration and Congress have adopted fair-value methodology to provide a more accurate assessment of other federal financial commitments. Including an adjustment for market risk would show the full subsidy cost of DOE’s loan guarantees and permit a better assessment of the costs of subsidizing these private sector activities.

In the midst of trillion-dollar deficits and debts, every effort is required to ensure a rigorous evaluation, full transparency, and good stewardship of federal financial commitments.

I look forward to your response to this request.

Sincerely,

Paul Ryan

Chairman

cc: Steven Chu, Secretary, Department of Energy

Jacob Lew, Director, Office of Management and Budget